Before I paid off my mortgage in 1998, I was saving in the 30%-40% range most of the time. After I paid off my mortgage, I was saving in the 40%-60% range. I am excluding major outlay years such as buying a new car or paying down the mortgage. I retired in 2008 at age 45.

Looks like about 35% of my gross, but that includes matching contributions from work, so that's artificially a bit high. Counting only extra student loan payments and savings into tax advantaged accounts. I don't make enough to max out my 401k, so no non-tax sheltered investments to speak of.

I don't expect to get within spitting range of all these folks for a long while. I'd like to (and will have to) spend on things that make the most of the years with a young kid(s). Don't ever get those years back - daughter is already 18 mos old.

A thing is right when it tends to preserve the integrity, stability, and beauty of the biotic community. It is wrong when it tends otherwise. -Aldo Leopold's Golden Rule of Ecology

Trust me, I don't -- I'm below median for my town. I knew I would never be able to afford a home in the SF Bay Area so I have no mortgage and no money to buy one outright but have healthy retirement accounts. But while I may have a nice amount in a 401(k)/Roth IRA I may be backing myself into a corner if I want to buy elsewhere. I believe I will ultimately move to a lower cost area in retirement where homes are affordable. But all my money will be tied up in those retirement accounts, so I'm not sure how to go about buying. This has me wondering and questioning.

I've been maxing out my 401k for a few years now, but since my income varies the percentage of savings toward retirement has varied as well. At it's most simplistic my base salary is $101K and so I save 17.3% of my income toward retirement. Of course that doesn't include employer matcing, rental property amortization (properties are held for retirement income), or any other savings/investments/business interests.

radchad3 wrote:Not sure how everyone calculates their percentages but I take the total amount saved (pre and post tax) and divide it by our W-2's. Calculating it this way gave us about 42% savings rate for 2012.

Which Box of the W2 do you use? Box 1 usually excludes pre tax 401k contributions and health insurance premiums and other pre tax deductions. If so you are calculating as fraction of net income. If you use Box 3 that is likely to be closer to your gross income.

I calculate everything as a fraction of gross income. To the gross income I add any employer 401k contributions.

I have been using box 1. I see what you are saying about using box 3 though. That is the only thing about these types of threads. The percentages can vary wildly depending on the numbers used. I wish there was a standard so we could truly compare apples to apples.

radchad3 wrote:"Not sure how everyone calculates their percentages but I take the total amount saved (pre and post tax) and divide it by our W-2's. Calculating it this way gave us about 42% savings rate for 2012."

rr2 wrote:"Which Box of the W2 do you use? Box 1 usually excludes pre tax 401k contributions and health insurance premiums and other pre tax deductions. If so you are calculating as fraction of net income. If you use Box 3 that is likely to be closer to your gross income.I calculate everything as a fraction of gross income. To the gross income I add any employer 401k contributions."

radchad3 wrote:"I have been using box 1. I see what you are saying about using box 3 though. That is the only thing about these types of threads. The percentages can vary wildly depending on the numbers used. I wish there was a standard so we could truly compare apples to apples."

My W2 represents essentially all my income, but if I used Box 1, I'd get about 165%

radchad3 wrote:I have been using box 1. I see what you are saying about using box 3 though. That is the only thing about these types of threads. The percentages can vary wildly depending on the numbers used. I wish there was a standard so we could truly compare apples to apples.

Economists use Disposable Personal Income (DPI) which is defined as Personal Income minus Personal Taxes. The Savings rate is then determined as a fraction of DPI.

This isn't straightfoward to answer. My "saving" is divisible into two main components.

(1) I've invested about 15% of my gross, pre-tax income for 35 years, in my workplace 401K's. In addition, in the last 10 years, I've invested an additional approximately 5% of my gross income in other tax advantaged vehicles (about 10% the last two years -- so total invested is about 25% of my gross now). Combined, despite several rough episodes in the market, my 401K's have me set for retirement in a few years.

(2) In addition to this I saved about 5% of my gross income to pay for my kids' college educations -- but this money was spent out, and after the kids finished college I diverted the savings into tax advantaged investments (mentioned above).

I could add to this that I've paid off my home mortgage, and so I could count my house as another significant investment. And if you want to get even fancier in the calculation, you could say that the money that I paid into Social Security has been a pretty darn good investment in a lifetime COLA annuity that I will soon activate. Not everybody automatically contributes to SS, btw. My brother, who had a great job for many years working at a special federal facility, has a very fine COLA defined benefit plan, but he did not pay into SS.

Last edited by Garco on Sat Feb 09, 2013 6:36 pm, edited 1 time in total.

Trust me, I don't -- I'm below median for my town. I knew I would never be able to afford a home in the SF Bay Area so I have no mortgage and no money to buy one outright but have healthy retirement accounts. But while I may have a nice amount in a 401(k)/Roth IRA I may be backing myself into a corner if I want to buy elsewhere. I believe I will ultimately move to a lower cost area in retirement where homes are affordable. But all my money will be tied up in those retirement accounts, so I'm not sure how to go about buying. This has me wondering and questioning.

In the same boat. I took a significant pay cut to move to move the end of last year, had to do it because of a life changing event. Now maxing out my 401k, Roth, and HSA (I include this considering I haven't spent a penny on healthcare outside of premiums in about 8yrs) is nearly 40% of my net income; you can do the math. Last year I was able to put around 60% towards retirement. Until I start a family a home isn't even a remote possibility, but I have become very accustomed to living with several roommates and it helps me keep up the savings.

Trust me, I don't -- I'm below median for my town. I knew I would never be able to afford a home in the SF Bay Area so I have no mortgage and no money to buy one outright but have healthy retirement accounts. But while I may have a nice amount in a 401(k)/Roth IRA I may be backing myself into a corner if I want to buy elsewhere. I believe I will ultimately move to a lower cost area in retirement where homes are affordable. But all my money will be tied up in those retirement accounts, so I'm not sure how to go about buying. This has me wondering and questioning.

Keep renting. Unless there are non-financial reasons you wish to own a home.

Trust me, I don't -- I'm below median for my town. I knew I would never be able to afford a home in the SF Bay Area so I have no mortgage and no money to buy one outright but have healthy retirement accounts. But while I may have a nice amount in a 401(k)/Roth IRA I may be backing myself into a corner if I want to buy elsewhere. I believe I will ultimately move to a lower cost area in retirement where homes are affordable. But all my money will be tied up in those retirement accounts, so I'm not sure how to go about buying. This has me wondering and questioning.

Keep renting. Unless there are non-financial reasons you wish to own a home.

By the looks of it, I know I'll keep renting since after doing various home vs rent calculators, I very well could do better renting long term if I invest the extra costs, mortgage interest, insurance, and upkeep of a home into my retirement accounts instead, and free from the stress and responsibilities of ever owning and being tied down to a house.

crowd79 wrote:By the looks of it, I know I'll keep renting since after doing various home vs rent calculators, I very well could do better renting long term if I invest the extra costs, mortgage interest, insurance, and upkeep of a home into my retirement accounts instead, and free from the stress and responsibilities of ever owning and being tied down to a house.

I'm in the same boat. The way I look at it is that even if owning house makes financial sense, it's still a lot of work and a general pain in the butt. If owning doesn't even make financial sense, what exactly is the point of owning?

That reminds me - the dryer is acting up again. Better call the landlady.

Around 40-50%, age 33. I max my 401(k) and back door Roth and throw another $30-40k in taxable. My goal is to at least semi-retire by 45. Having no kids and relatively cheap rent (in a high cost area with high salaries) makes this easier for me than others. The key is I've always saved my raises instead of increasing my standard of living.

Depending on if you consider employer matching (and the subsequent increase in salary) we save from 20-24% for retirement.

We're in our mid 30s and fully paid off our home this year. The "extra" percentages had been going towards that (paid off in 11 years). Now, for the next few years we're saving for some home remodelling (around 9% of income). In 3.5 years our first child will enter college and that 9% of income will be redirected towards college expenses for her. Four years after that our second child will be ready for college and that money will then go to him (hopefully she'll be done). THEN we'll have several years to beef up retirement savings until it's time for number 3 (not yet born) to go to college!

We've been saving a minimum of 15% since our mid-20s. The "extra" at that time was saving for our home downpayment. We upped the percent when we hit 30 by adding Roths into the mix. As a single income family, I *wish* we had extra space for tax advantages retirement savings!

Only the bogleheads could make me feel uneasy with my mere 24% of gross retirement savings rate! Early 30's.

I'm not yet maxing all available tax advantaged space, though once I do, I honestly think that will be plenty. Running the numbers I feel comfortable that 25 more years of my exact same savings amount will be sufficient for an early retirement.

Hub wrote:Only the bogleheads could make me feel uneasy with my mere 24% of gross retirement savings rate! Early 30's.

I'm not yet maxing all available tax advantaged space, though once I do, I honestly think that will be plenty. Running the numbers I feel comfortable that 25 more years of my exact same savings amount will be sufficient for an early retirement.

No worries, you're doing far better compared to the sad truth of the majority in this country:

We live well within our means (obviously) but the saving has not been burdensome. We had a custom house built 30 years ago, we buy new cars (with cash, and drive them forever), we put one kid through private high school and both kids through private college, etc. But in many ways our tastes are fairly simple and we have never worried about keeping up with the Joneses.

FWIW: I add all of our earned income (including 401k contributions) to calculate our gross earned income. Then subtract Federal, State, FICA and Medicare taxes to get net earned income. Income taxes have averaged 30% over the 25 years. I don't include employer match in any calculations.

10k raise next year. Decent % will go towards health insurance (still under parents for the rest of the year) rest will go into checking account.

then I will get a 1k raise every other year. That will again go into the checking account.

If checking account ever gets too big I will increase my investments. But it is only 20k at the moment and it will be used for multiple things- buying a car in the next year or two (15-20k)- a second car (8-10 years away 20-25k)-down payment for a house (100k will be 5-10 years away)-emergency fund (50k)-grad school (30k)

thus it is probably 13-15 years before I will start investing in retirement funds (besides the current 17.5k a year in tsp and 5.5k in ira).